Tax issue spurs PhillyCarShare to sell to Enterprise

By Bob Fernandez, INQUIRER STAFF WRITER

Posted: August 08, 2011

Facing about $2.7 million in back taxes and penalties, PhillyCarShare, the organization thousands of city residents rely on for automobiles, has agreed to sell itself to car-rental giant Enterprise Holdings, ending a nonprofit experiment launched in 2002 to ease the financial and environmental burdens of vehicle ownership.

An announcement of the sale is expected Wednesday. Terms are not likely to be disclosed. Enterprise and PhillyCarShare have obtained approvals from the Pennsylvania Office of Attorney General and the Department of Revenue in the recent days, and those state approvals will limit Enterprise's future financial liability to PhillyCarShare's past tax issues.

A 2010 audit by the Revenue Department found that PhillyCarShare did not charge its members a $2 car-rental tax on some types of transactions over several years, PhillyCarShare executive director Gerald Furgione said last week.

The organization, the third largest of its kind in the nation, also was under financial stresses because of the weak economy and the complexities of managing a 250-car fleet, he said. The tax issue had ramifications with its relationship with its bank.

"What the board saw going forward was competition and financial issues. We wanted to do things we couldn't," said Jacob Smith, chairman of the PhillyCarShare board. Easing some concern over the transaction was the belief, Smith said, that PhillyCarShare and Enterprise had a "shared vision" of the future of the service.

Furgione said Enterprise would "take care of our obligations and assume all our assets. Enterprise definitely saved us. The only thing we regret is that we will no longer be a nonprofit."

Revenue Department spokeswoman Elizabeth Brassell said Friday that she could not comment on PhillyCarShare because of taxpayer confidentiality. She noted several publicly filed liens against the organization.

Enterprise is expected to retain the PhillyCarShare name and its 25 employees and to operate the business independently of its more than 100 car-rental outlets in the Philadelphia area. The privately held St. Louis company operates the Alamo and National car-rental brands, as well.

PhillyCarShare's fleet has shrunk from a peak of about 400 cars in 2009. Among its 13,000 members are 4,000 companies or institutions. A PhillyCarShare residential member pays $15 a month to belong to the organization.

Available in more than 100 locations in Center City, South Philadelphia, the Temple University area, and West Philadelphia, the group's vehicles cost a minimum of $4.45 an hour, plus 25 cents a mile. PhillyCarShare members take about 130,000 trips a year with the cars.

Car-sharing isn't a totally new business line for Enterprise, which operates a WeCar car-sharing subsidiary.

"We intend to expand and enhance the PhillyCarShare fleet as quickly as possible," Ryan Johnson, assistant vice president for WeCar, said in a statement.

"We also intuitively understand - and just as the New York courts confirmed last year - that car-sharing services are a form of car rental, and that local car-rental excise taxes unfortunately are owed regardless of whether vehicles are rented by the hour, the week or longer."

Nonprofit car-sharing groups led the way in showing that there was a market for the service, Furgione said. In its 990 filing with the Internal Revenue Service, PhillyCarShare says its mission was "to maximize the economic, environmental and social benefits of reduced automobile dependence in the Philadelphia region through community-based car sharing."

"We will be part of a large corporation," said Furgione, "but it will not change our mission or how we relate to our members."